We get all kinds of questions from folks, but a recent one surrounds USDA Home Loans. Is USDA Open For Business Now That the Government Shutdown is Over? The Answer is Yes (hallelujah!) and NO – drats…
The interesting thing about the Shutdown is that it happened when the Government typically ends it’s fiscal year for accounting purposes. So, traditionally, the Government ends the “budget accounting” year at the end of September – and the new regulations regarding Income Limits (for instance) are released, and change beginning January 1st.
Obviously, this October 1 – Congress shut the Government down. So the Internet, online part of the USDA Home Loan NC system shutdown at that point too. The Automated Underwriting system for USDA Home Loans is called “GUS” and that system shut down just like the website for USDA Guaranteed loans did.
When Congress ended the shutdown last week, the USDA Home Loan Website came back up, showing all of the USDA Maps (current and future changes) – but the GUS system did not go back into action on Friday. Apparently – with trying to reconcile the budget, etc. etc. and legal stuff, etc., etc. there was a delay. That delay will be SIGNIFICANT for some folks.
If you have a loan that is seen by USDA in the next 5 days or so, you will likely get a “Conditional” approval.
USDA Home Loan Conditional Approvals
We use the GUS system to initially approve a mortgage loan. It’s part of our “pre-qual” system. It’s a delicate system. Literally, “delicate,” meaning if you don’t get an approval with your initial submission, and you try and run someone through the GUS system 3 or 4 times ( as a comparison, we’ve run people through the Freddie Mac system 14 times with a car, without the car payment – paying off a collection, etc) you will likely get a full blown Underwriting review required as part of your “findings.”
The USDA Home Loan Underwriters rely on the GUS System when they are manually Underwriting a USDA Home Loan. So unlike any other mortgage – the USDA Home Loan in NC is physically underwritten by a “real” person, at the USDA Home Loan NC office.
USDA doesn’t actually make USDA Home Loans – they only insure them against default. Generally speaking only 1 in 6 USDA Home Loans will require a “full” Underwrite. Meaning that most USDA Home Loan Underwriters are only looking at the Contract, the physical address, the loan Application, credit report (which is only good for 90 days) and the Appraisal – and then issuing an approval based upon those few documents – not ALL of the documents in the file.
One out of 6 is pulled (actually indicated in the system) for a FULL underwrite – that’s where it gets tricky when it comes to documents expiring... so even if you have a loan waiting at USDA, and the pay stubs are expiring – you might NOT have to go back through the WHOLE system if your loan was not flagged for a full underwrite, then again – you could be one of those lucky ones… if you WERE flagged for a full underwrite by the USDA Home Loan NC Underwriters – then the documents will necessarily need to be updated, and re-submitted to USDA. (I’m hoping this makes sense – call us at 919 649 5058 if this seems a bit fuzzy).
Please don’t read this to say that you have to be re-submitted because of something your loan officer did. As loan officers, we have NO CONTROL over who gets “flagged” as a full underwrite – and who doesn’t. It’s much like winning the Lottery – only in Reverse.
About the Conditional Approval – the USDA Home Loan NC main office sent out a memo on Friday October 18, 2013 addressing the GUS Internet System “issues” and indicated that they had not finished their year end accounting when the Government actually shutdown. As a result – they said that they will only be issuing Conditional Loan Approvals through the end of next week.
What the Heck does that mean?
For some USDA Home Loan NC Home Buyers this means that you could be AT USDA right now, get an approval – and not be able to close on your home.
A Conditional Approval means that the USDA Home Loan office approves your loan, and that they will Insure you against default – assuming their “books” close out for the fiscal year the way they need for them to.
If the books don’t close out the way they need for them to – and they DON’T meet the Congressional Budget requirements (which is entirely possible) then they will not be able to insure the loan against default, and ultimately - the Conditional Approval is not worth the paper it’s written on.
Because of this – most Banks will NOT close a mortgage loan with a USDA Home Loan Conditional Approval. You can understand – if it was YOUR money – would YOU loan it out under those circumstances??
Our Bank is willing to take that risk.
So, if you got your mortgage loan through us, and you are one of the 17 people we currently have at the USDA office (growing cobwebs on your file) then we WILL close your loan as soon as we get SOME KIND of approval from the USDA Home Loan NC office. If you are working with the “builder’s mortgage company” - good luck.
As a Side Note to all of this… read: “if you haven’t written a contract for a new home yet:” Those folks who want to buy a home using a USDA Home Loan should be checking with us regularly (or subscribe to the blog for updates) because once the USDA Home Loan NC office finishes balancing the books – it’s entirely possible that the USDA Income Limits for several counties in NC will change.
We are a state that is seeing one of the HIGHEST relocation numbers in a SMALL number of counties. In other counties, we have the highest Unemployment rates in the country! The USDA Home Loan Income limits are based upon the median income limits, as recorded for the previous 12 months. Therefore, for parts of NC, those numbers could be higher – or lower, depending on where you want to purchase a home.
USDA Home Loan Map Changes
Because of the way the Congress approves bills – the current USDA Home Loan Maps will be in effect until the Continuing Resolution expires on September 30, 2014.
The US Budget is actually made up of 13 Appropriations Bills. One of those Bills is the Farm Bill.
The USDA Eligible Area Map Change is actually part of the Farm Bill that was initially put together by Congress. It changed the definition of Rural.
In the current Senate and House Farm Bills (yes, I’m enough of a nerd I actually read them) the change to the definition of Rural for homes in NC is “pushed back” until 2015 or 2020 / depending on which Bill you read.
This means – that if Congress is only able to pass a “continuing” resolution (again) in January- the USDA home loan maps will not change. The ONLY way for the USDA Eligible Area Maps to change is for a FARM BILL to pass – with language in it that addresses which census data the map should be drawn from.
So why does the USDA Home Loan website show “Future” Eligibility changes??
In my mind, it’s for two reasons… one – it let’s folks who buy a house now know what MIGHT happen when they go to sell their home. So you buy a house, using the USDA Home Loan program, but if you sell it – your house might not be as good of a deal, because it no longer qualifies for the program.
The FUTURE map shown on the USDA Home Loan Eligible Area Map website also let’s Congress know EXACTLY what parts of their District might be affected by the change in the definition of Rural. READ: If YOUR favorite area is going to be affected by the changes – CONTACT your congressional representatives NOW. That means YOU Johnston County (Rep. Renee Elmers).
If you are looking for a USDA Loan Raleigh NC, call us. There are many areas near Raleigh NC that qualify for the USDA Home Loan program. It’s probably the best mortgage program available right now – because it doesn’t require a down payment, and it has very very low PMI Costs.
Want more information (or I’ve confused you enough) about the USDA Conditional Approvals we will be seeing for the next week or so – call Steve and Eleanor Thorne 919 649 5058. We would LOVE to help you with your home loan, and we do offer all of the First Time Home Buyer programs available! Ask a question below – or connect with us on Facebook or Google Plus (our son says text, call – smoke signals – I’m pretty digitally saavy) Either way, just know that we’d just like to help. Buying a home, and getting a mortgage can be an exhausting process – we want to make that easier!